The trust can employ the principals and provide salary packaging
The trust can employ principals and provide employer sponsored Superannuation
No need to lodge returns and other forms with ASIC
The principals have a fixed interest, which is good where independent parties are involved
The 50% CGT discount is available
There is no equivalent to the share value shifting rules
It is less costly to wind up then a company
Easy to admit new partners by issuing units without CGT consequences
The substantiation rules do not apply
Disadvantages
Less people understand how they operate
Ultimate beneficiary statement rules apply
Complex PAYG calculation required for beneficiaries
More costly to establish and operate than a partnership of individuals
A change in unit holding can cause pre-CGT assets to become post-CGT assets
A change in asset holding can cause pre-CGT units to be taxed as post-CGT units
Complex trust loss rules apply
Cannot transfer losses
Cannot distribute losses to beneficiaries
May need to elect to be a family trust. May not be able to elect to be family trust
No perpetual existence, normally must be wound up within 80 years
Distribution of tax-free income and gains has CGT implications to the beneficiaries
Individual trustees can be personally liable for debts of the trust
Accumulated income taxed at top marginal rate under S.99A ITAA 1936
If small business CGT retirement exemption is obtained, the principal must retire as an employee of the trust
If the trust is funded by debt, rather than equity, the units or interests owned by the beneficiaries will have a low cost base and this will cause
problems where non-assessable amounts are distributed
If units in unit trusts are owned by discretionary trusts, the unit trust will not be able to satisfy the controlling individual test
Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this article is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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